Mark the time and place: Oct. 26, 2001, Lockheed Martin Aeronautics Co. (LMT
) in Fort Worth. On that day, the defense contractor won the first piece of the biggest manufacturing contract ever--$200 billion to build a new family of supersonic stealth fighter planes for the Defense Dept. That Friday also marks the kickoff of a new technology era, one that could transform the basic workings of every major corporation.
Lockheed's mega-win will require some intricate teamwork. More than 80 suppliers will be working at 187 locations to design and build components of the Joint Strike Fighter. It's up to the 75-member tech group at Lockheed's Aeronautics division to link them all together, as well as let the U.S. Air Force, Navy, and Marines, Britain's Defense Ministry, and eight other U.S. allies track progress and make changes midstream if necessary. All told, people sitting at more than 40,000 computers will be collaborating with each other to get the first plane in the air in just four years--the same amount of time it took to get the much simpler F-16 from contract to delivery in the 1970s.
A project this enormous requires a feat of computing to keep all its moving parts in sync. Lockheed and its partners will be using a system of 90 Web software tools to share designs, track the exchange of documents, and keep an eye on progress against goals. Major partners such as Northrop Grumman Corp. (NOC
) already are hooked up. In about six months, the rest will be on board. "We're getting the best people, applying the best designs, from wherever we need them," says Mark Peden, vice-president for information systems at Lockheed Martin Aeronautics. "It's the true virtual connection."
Web software tools make it possible to reinvent entire business processes
Management experts have long talked about the so-called virtual corporation: a company that focuses on what it does best and farms out the rest to specialists who can do it better. Now, a new generation of Net-collaboration technologies is making it easier for companies to work hand-in-hand with their partners to bring new products to the market in record time--and on penny-pinching budgets.
These jazzy new technologies could take the Web a step closer to delivering on its potential. Companies can reinvent entire business processes, such as product design, supply-chain management, and sales and distribution relationships. The Net allows people from different companies with incompatible computing systems to meet in the middle on Web sites that speak a common language. And, instead of simply sending data from PC to PC, these Web tools let people separated by oceans interact with one another as if there were not even a wall between them. They can talk via their computers while looking at shared documents, carry on e-mail chats, and use electronic white boards--where two or more people can draw pictures or charts, in real time, as the others watch and respond.
TAPPING THE BEST TALENT. If this stuff takes off, the corporation as we know it could be turned inside out. Picture it: Companies that have done everything in the past from ordering parts to bolting them together to selling them could instead use the Web as a giant electronic Yellow Pages--to find experts to do many of these jobs and then to collaborate with them over the Net on a minute-by-minute basis. The same company could offer its expertise to other firms, assembling and disbanding teams as projects begin and end. Tighter relationships between companies also could spur innovation as they tap the best talent from anywhere in the world. Workers might end up identifying less with their company than with their cross-company team--and get bonuses based on the team's performance. Potentially more radical than reengineering, Web collaboration could reshape the traditional corporation, says George Colony, CEO of tech market researcher Forrester Research.
For now, most companies would be content with technologies that make them far more flexible and efficient. Previously, they mostly relied on a pricey older technology called electronic data interchange, or EDI, to trade basic information like purchase orders. Because of the limits of the technology and resistance to changing business processes, only about 10% of large companies are collaborating with partners, according to Raymond E. Miles, professor at the Haas School of Business at the University of California at Berkeley. "People don't know yet how to do this, but they have to do it," says Miles. "You're not going to create wealth in the 21st century the way you did in the 20th."
The new tools are barely out of the box, but some early experiments are showing solid results. By using the Web to coordinate auto design by internal engineers and external suppliers, General Motors Corp. (GM
) can get a car into production in 18 months, down from the 42 months it took in the mid-1990s. Land O'Lakes Inc. has saved $40,000 a month since September by using the Web to stuff butter and cheese into trucks it shares with companies such as Georgia-Pacific Corp. (GP
) And Deloitte Consulting says it can bring a new team member up to speed on a project in a day or two, down from three weeks, by keeping everything they need to know on a Web site.
"THE GREAT ENABLER." If this stuff delivers on its promise, it could help drive productivity growth for years. Yankee Group Research Inc. says that over the next five years, collaborating over the Net can save companies $223 billion by cutting transaction, production, and inventory costs. "There's an opportunity for a whole new level of business-performance improvements in the collaborative redesign of processes, using the Internet as the great enabler," says James A. Champy, chairman of consulting at Perot Systems Corp. (PER
) and author of X-Engineering the Corporation: Reinventing Your Business in the Digital Age.
Still, Net collaboration is only in its toddler phase. Network connections aren't always reliable, so real-time collaboration sessions sometimes cut off suddenly in midstream. Technology novices tend to be flummoxed by logging on to Web sites and uploading documents. And even when the software works as advertised, it isn't always quickly adopted. Culture is the main hangup. Like squirrels burying nuts for winter, companies and their divisions have traditionally hoarded information--even from each other--as a competitive advantage. The challenge is to come up with ways to reward employees for working in new ways.
Tight technology budgets also have slowed adoption of new software. Many companies delayed collaboration projects in the second half of 2001. "They weren't going full-bore because they got burned before" by earlier Internet technologies that didn't deliver, says analyst Heather Bellini of Salomon Smith Barney. "Next year is when we'll move beyond initial deployments. We're still very much in the early adopter phase."
DIGITAL CHAIN REACTION. Being a collaboration pioneer has paid off big-time for Juniper Networks Inc. (JNPR
) It farms out operations like manufacturing, logistics, and customer support so it can concentrate on what it does best: designing and selling networking equipment. Because the company is so efficient, even when revenue growth slowed to 32% in 2001 from a fivefold jump in 2000, it was able to increase research and development spending by 80%. "We were able to manage costs to protect strategic investment," says CEO Scott G. Kriens. "This has a lot to do with the outsourcing."
Juniper's network links its own operations with those of partners--setting off a digital chain reaction. Customers place an order via the Web, which relays the order to Juniper's core planning software, which spits out the details to every internal department that needs the info--from finance to supply chain and to outsiders like contract manufacturers. Juniper's production planning system automatically vets the manufacturer's inventory, raw materials, and production lead time--then coughs up a date when the product will be shipped directly to the customer. If a customer changes her order on short notice, a team of material planners and process engineers from Juniper and its contractor manufacturers are alerted by e-mail. They get together in a Web conference to figure out what needs to be done to deliver on time.
One of the most effective uses of the new collaboration technologies is in the area of product development--everything from designing cars to developing new prescription drugs. This kind of teamwork not only increases efficiency but boosts innovation--the holy grail of companies hoping to produce the Next Big Thing in their industry. General Motors (GM
), for one, has chalked up big wins since setting up a collaborative engineering system in 1999 that allows GM employees and external auto parts suppliers to share product design information. Previously, GM had no way of coordinating its complex designs across its 14 engineering sites scattered across the world, plus the dozens of partners who design subsystems.
Changing old habits is only one of the roadblocks to smoother collaboration
Now, GM's collaboration system serves as a centralized clearinghouse for all the design data. More than 16,000 designers and other workers use the new Web system from Electronic Data Systems Corp. (EDS
) to share 3-D designs and keep track of parts and subassemblies. The system automatically updates the master design when changes are finalized so everyone is on the same page. The result: GM has slashed the time it takes to complete a full mock-up of a car from 12 weeks to two. The time saved by online collaboration frees up workers to think more creatively--mocking up three or four more alternative designs per car.
After products roll off the assembly line, Web collaboration software can help sell them. Companies with complex sales channels are turning to the Net to help sign up resellers and coordinate marketing. PTC, in Needham, Mass., which makes product-design software, is using Web-collaboration software to reach out to resellers it needs to expand to new markets not already served by its sales force. The software from ChannelWave Inc. automates the recruiting and certification process. It now takes a day to sign up a partner--down from a week. In a year, PTC has signed up about 170 partners. PTC expects to recoup the $22,000 a month it pays for ChannelWave with an improved rate of converting leads for resellers to sales--35%, vs. 20% in the old days. It will be able to use the Web site to hand off leads to specific resellers and track their attempts to land customers. If a reseller is having trouble, PTC can step in to help cement the deal.
Once a sale is made, the next step is delivering products. Collaboration technologies are saving money in warehouses and on 18-wheelers. A dozen companies including Land O'Lakes and Georgia-Pacific use a collaboration system devised by Nistevo Corp., a software company in Eden Prairie, Minn., to use the fewest trucks possible and keep them full by matching loads and routes. The companies submit all the details about their routes and contracts with truckers to the Nistevo Web site. The company matches up the participants' schedules and notifies potential partners by e-mail. Once the companies agree to terms, they log on to a Web site to place an order for a truck and track the shipments.
SHINING IN A CRISIS. The rewards are starting to roll in. In just six months, Georgia-Pacific says it has saved $600,000 on one, six-legged route from Chicago to Maine and back again. And Fernando Palacios, vice-president for operations and supply chain at Land O'Lakes, says, based on initial results, the company expects to save a half-million dollars this year. Payoffs like that more than cover the average $250,000 annual cost for Nistevo and the $75,000 installation fee.
There's no matching Net collaboration when a crisis breaks out. Web sites can be set up in minutes. People are able to share data, schedule meetings, conduct forum discussions, and view up-to-date drafts of documents they're working on. Using a Web site provided by New York-based IntraLinks Inc., 80 people from seven consulting firms produced a report for the New York City Partnership on the economic impact of the September 11 attacks. It took just six weeks--rather than the normal six months or more. The timing was crucial since the city needed facts to back up its pleas for relief funds. The Web site made sharing information a snap. Every morning, Jenny Abramson, an associate with Boston Consulting Group, posted links to newspaper articles on the Web site--alerting her colleagues with e-mails. "We were able to spend more time on the content issues, and less on logistics," says Abramson.
Those are some of the best-case scenarios. In other cases, collaborative projects have yet to deliver the goods. Last spring, Baker & McKenzie, a Chicago law firm with 3,000 attorneys and 62 offices worldwide, was enthused about a new multimillion-dollar collaboration system from Lehi (Utah)-based Nextpage Inc. that would allow its lawyers to manage cases and corporate mergers with other parties over the Web. The company had an ambitious plan to roll out the service to 10 of its offices in the second quarter and get the other offices online by the end of the year.
A key lesson: It's people who must work together, not just machines
It didn't happen. The firm underestimated the training costs and the difficulties of changing peoples' behavior, especially among workers who weren't computer-savvy. During an early training session, one older lawyer actually confused a Microsoft PowerPoint presentation they were using to train people for the collaboration service itself. "Getting people to practice in a different way is a very ambitious exercise," says Mark Swords, a partner heading the initiative. Now, Swords says, Baker & McKenzie plans to roll out the service in the second quarter, a year later than expected, and in only two offices instead of 10 or more. The firm remains committed to it because he believes it could help land new clients.
Changing old habits is only one of the roadblocks to smoother collaboration. Technology bugs and a competitive wariness are making people move gingerly. One tech manager at Boeing Co. (BA
) complains that Microsoft Corp.'s NetMeeting software for online meetings "is terrible....Everything freezes so people have to reconnect." Engineers fret about the time it takes to transfer bulky design files. And early users of a collaboration system made by Groove Networks Inc. in Cambridge, Mass., complain that they have to reformat Microsoft Word documents before they can share them in cyberspace. Software companies are scurrying to work out the bugs so their tools catch on faster.
MAINTAINING FACE TIME. One of the key early lessons is that for collaboration to work well, it has to be between people, not just machines. Management experts say digital workspaces can't completely replace more traditional interactions, especially in the creative process. In-person communication is important for training, building relationships, and riding herd on a difficult project. Nistevo addresses that by mixing tech wizardry with old-fashioned meetings. Palacios of Land O'Lakes says companies participating in Nistevo's trucking project build trust and sort out their problems by meeting face-to-face every quarter.
Lockheed won't have the luxury of waiting for in-person confabs to get over hurdles. Its suppliers span 26 states and three countries. But it's willing to put up with the glitches that are inherent in electronic collaboration. The Lockheed team is heading into the digital wilderness with no thought of turning tail. "This wasn't an accounting decision," says Lockheed's Peden. "It was a what-do-you-want-to-be-when-you-grow-up decision."
Other companies will face similar choices as these teamwork tools improve. For many outfits, finding a way to make collaboration work across corporate boundaries may be the surest path to reaching a ripe old age.
By Faith Keenan and Spencer E. Ante
Contributing: Ben Elgin and Steve Hamm
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